Capevin rise sparks Distell rumours
bdlive.co.za - Oct 9th 2014, 12:09
Cape Town — Changes may be afoot in the control structure of liquor giant Distell after shares in its holding company, Capevin, touched a record high on Tuesday.
Capevin, which holds a 26.86% stake in Distell as its only investment, has mostly traded at a marked discount to its underlying value. The discount was almost 18% in mid-2013 and 12.3% at the end of June this year, but has — at some points — stretched to more than 20%.
However, even though the share retreated from its intraday high of 920c, the discount has still narrowed to a sliver, sparking speculation in the market that the Capevin structure could be collapsed, and the shareholding in Distell unbundled to shareholders.
Capevin’s major shareholders include large institutional investors Coronation, Allan Gray and Foord, as well as conglomerate Remgro, which also ranks as the biggest single shareholder in Distell.
A source in Stellenbosch, who asked not to be named, said the collapse of the Capevin "pyramid" structure had been on the cards for a while. "If I was to offer a probable scenario, then I’d say the Capevin structure is being looked at.…"
Nevertheless, the source said there were also murmurings that SABMiller — the second-largest shareholder in Distell — might be reviewing its investment in Distell. "Whether such speculation would cause the Capevin discount to narrow is debatable."
SABMiller has been a longstanding shareholder in Distell, but is largely seen as a passive participant with no board representation.
Opportune Investments CEO Chris Logan, a Capevin shareholder, argued that theoretically there should be an inferred value of 14, 99 Capevin shares for every Distell share, with no "see-through" discount. He said the current price changed the ratio to 15.05 Capevin shares for every Distell share, meaning a discount of just 0.4%.
Mr Logan said he hoped the discount did point to efforts to dismantle the Capevin structure. "While the structure has made it difficult for Distell to use its scrip for value-accretive transactions, the possible collapse of the structure would be the perfect icebreaker in normalising relations between Distell and its major shareholders, Remgro and SABMiller."
He said the Capevin structure harked back to the aftermath of the "beer war" between Rembrandt (with Luyt Breweries) and the old SA Breweries in the seventies, when it might have been necessary to keep the beer giant at bay. "Of course, today, having shareholders like Remgro and SABMiller side by side could be a huge advantage for Distell."From DFM Publishers (Pty) Ltd
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